Bob Diamond had to go: but it's not Libor fixing which has ruined the global economy

Even a Diamond, it turns out, can be cracked – this morning, several days after it became inevitable, the Chief Executive of Barclays, Bob Diamond, announced his resignation from the company. “The external pressure placed on Barclays has reached a level that risks damaging the franchise – I cannot let that happen" he said, in a statement. "I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth."

Bob has become a figurehead for the failure of the banking sector to reform. In January, the banker, who has been paid around £75 million in the last five years, told the Treasury Select Committee that "There have been apologies and remorse from bankers. What we need is a dose of confidence; we need to think about what's best for the economy of the UK". It was reported everywhere that he said the time for remorse is over.

That he felt able to say that, when it hadn't even emerged that his bank was busy trying to fix the Libor rate to protect itself from the crisis, and so that its traders could make bigger profits, is almost comical. Even last night, the banker was claiming that the actions of Barclays bankers were "on average small – typically less than one basis point", ignoring the obvious fact than even a 1/1000 adjustment in interest rates could, in a market with a flow of hundreds of trillions of dollars, be worth tens of millions.

So I don't suppose he'll be much missed. As George Osborne said on the Today Programme this morning, "I think it’s the right decision for Barclays and the economy… I hope it’s the first steps to a more responsible banking system". No doubt that Ed Balls, who George Osborne mocked this morning for his role as City minister in the last Government, agrees. He and Ed Miliband may keep pushing for a FIPI (a full independent public inquiry), rather than the Parliamentary inquiry that the Government wants. They may even get it. Either way, we will get a taste of it tomorrow, when Mr Diamond faces the Treasury select committee to "fight back", as the FT reports this morning. Recriminations are coming.

But can we please remember: it's not fixing Libor which ruined the British or global economy. It was a credit bubble, which bankers helped along, but did not create. And we still need a functional banking system – one which feeds credit from ever more cautious savers to investors to create growth.

Currently, we don't have that. Despite QE, the money supply is collapsing. Deflation has the potential to strangle economic output for years more to come. European-wide austerity is proving self-defeating. If we forget that, and get stuck into a long, endless inquiry, incomprehensible to most, about banking, then the costs will be far greater than those caused by basis point here or there on Libor.